Wednesday, September 19, 2007

Montevideo "Craps Out"

In a semi-amusing story that ran here locally the gov't run casino (or at least if they don't run it, they limit the competition for a generous piece) actually reported a loss last year.

I was explaining to a co-worker that I started an online casino back in the 90's and that it is about a "no brainer" of a money maker that there is -- as long as you can do the marketing the operations is relatively straightforward, not a lot of innovation required, no inventory headaches....the only problems are hackers and thieves.

He argued that you had to have a lot of money to start a casino (once the infrastructure was in place) in case you lose some big bets.

I laughed and explained that probabilities and the law of large numbers had been worked out such that other than a 15 sigma event or other highly improbable outcome it was hard to have more than a losing day here and there.

The casinos, you see, for obvious reasons, have minimum and MAXIMUM bets on most games. This precludes the naive strategy of someone using a martingale strategy and simply doubling his bet until he comes out OK.

They also shy away (for the most part) from taking big one time bets. They are all about taking lots of the same bet over and over and letting the laws of large numbers work to their advantage. Some (very few) may have large proposition betting departments and lots have sports books which can see large lopsided bets on outcomes out of their control. However, in these cases, when a book has a very lopsided bet they will either edge the line in one direction or the other or, more likely, "lay off", some of their exposure to another book in the industry.

Even the online guys in Costa Rica had cordial working relationships with the other players in the market and would get on the horn before a big game if their exposure became too lopsided.

Anyways, all of this is just to express my utter fascination that their weren't arrests and a very public "perp walk" by some high profile casino execs after it came to public light that they lost money for a year.

Short of massive, gross incompetence and/or outright theft this is a virtual impossibility for a casino. If time and energy permits I'll get a copy of the original spanish article to post my source as a link here.


1 comment:

Anonymous said...

Maybe those MIT boys reunited?